$36M cut to S.C. education delayed

COLUMBIA — The U.S. Department of Education plans to delay for a year a punishment of South Carolina for not spending enough on special education — a move state officials say will give them time to challenge the loss of tens of millions of dollars in aid.

The federal agency says in a letter it will reduce South Carolina’s federal allocation for students with disabilities by $36.2 million on Oct. 1, 2012. The penalty is being imposed because of state cuts in special education in the 2009-2010 school year.

Education officials feared the federal penalty would come this school year.

The letter, dated Tuesday and obtained by The Associated Press on Friday, says the agency is exercising its discretion to delay the reduction, though it doesn’t say why. It warns states generally not to rely on such a delay in the future.

A U.S. education department spokeswoman, Liz Utrup, said the delay was to give the state time to prepare for the funding cut.

State education department spokesman Jay Ragley said the one-year delay allows an appeal of the decision from South Carolina to be heard and, if necessary, for the state to make its case in court or Congress.

“This gives us a year to exercise our full rights,” he said.

A spokeswoman for the state School Boards Association said that at least districts won’t be hit with another mid-year cut.

“No cut is good, but the question that remains is if there will be a cut in federal allocation in 2012,” Debbie Elmore said.

The federal government’s fiscal year starts in October.

In June, the federal government threatened to withhold $111.5 million from the state as punishment for not spending enough on special education over the past three years due to budget cuts. Federal law bars states from spending less money on special education from one year to the next, though states can apply for an exemption.

In a June 17 letter, the federal agency said the state should have spent an additional $20.3 million on special needs students in 2008-09, $67.4 million in 2009-10 and $75.3 million in 2010-11. But it approved a waiver for 2008-09, a partial waiver for 2009-10, and said it would forgive the entire shortfall for 2010-11 if South Carolina schools chief Mick Zais acted quickly.

Cobbling together money from better-than-expected sales tax collections and lower-than-expected prices for school bus diesel fuel, the state agency rushed to distribute $75.3 million to districts before South Carolina’s fiscal year ended June 30. The amounts doled out ranged from $49,300 to rural McCormick County to $8 million to Greenville County, the state’s largest district.

But that still leaves the $36.2 million reduction from 2009-10, which would be a permanent cut.

It would be deducted from the $183 million the state would otherwise get from the federal government to help pay for special education. The federal allocation covers just more than 20 percent of what the state and local districts spend on special education services, Ragley said.

“Why is the penalty for not meeting spending requirements to take money away from special education students?” he asked.

In an appeal with the federal agency’s Office of Administrative Law Judges (OALJ), Zais argues the entire penalty should be waived, or at the very least be made a one-time cut, rather than continue perpetually.

“The 16-month delay in issuing an opinion adversely impacted South Carolina,” wrote the agency’s lawyer, Shelly Kelly, in a summary of the appeal, filed Aug. 1. “Additionally, the USDE erred when it considered unanticipated budget surpluses that South Carolina realized towards the end of the 2009-10 fiscal year. The SCDE could not have used those funds” to meet maintenance-of-effort requirements.

If the $36 million cut stands, it could be spread among the state’s 85 school districts, the statewide charter district, the state school for deaf and blind students, and prison schools.

Local districts could handle the reduction differently. Options include reductions in services for other students, increased property taxes or — for districts that still have some savings — dipping into them, said Molly Spearman, executive director of the state Association of School Administrators.

“The delay will help. It gives them another year to prepare for it, but there’s only so much blood you can squeeze out of a turnip,” she said.

Spearman questioned why Zais is fighting for the special education money when he and Gov. Nikki Haley are refusing to request $144 million in federal bailout money for education.

“It’s very ironic this administration wants to pick and choose which federal funds it wants to take,” Spearman said. “We’ve just turned down $144 million that South Carolina taxpayers have paid for that would pay for jobs and help out, and we’re sending that money to other states.”

Ragley reiterated that state and federal officials have known since last September, while Zais was on the campaign trail, that South Carolina didn’t qualify for the federal bailout money because of state cuts to colleges. Qualifying would require congressional action, and the state’s congressional delegation doesn’t need a permission slip from Zais, he said.

The federal agency notified Zais and Haley on Aug. 5 that the state must apply by Monday, or the bailout money would be distributed to other states. South Carolina is the only state not to receive its share of $10 billion approved by Congress last August specifically to save teaching jobs in the past and current school years.

Ragley also said the federal government mandates that public schools meet the needs of special education students, but has never met its decades-old commitment to pay 40 percent of the costs. It is not mandatory that the state accept federal bailout money, which Zais has consistently opposed as unnecessary and a federal intrusion into state education, Ragley said.